South Korea is considering allowing domestic institutions to issue virtual assets, with stablecoins still being controversial

Odaily News: During his attendance at the Asian Financial Forum in Hong Kong, Lee Chang-yong stated that, in light of market pressures, Korean authorities have already permitted domestic residents to invest in virtual assets issued overseas. Financial regulatory authorities are considering establishing a new registration system to allow domestic institutions to issue virtual assets.

Lee Chang-yong pointed out that if a Korean won-denominated stablecoin were to be launched, its primary use might be concentrated in cross-border transactions, while tokenized deposits would be more suitable for domestic payment scenarios. However, he emphasized that there is still significant controversy surrounding stablecoins. The core concern lies in whether Korean won stablecoins could be used to circumvent capital flow management, especially when combined with US dollar stablecoins.

He further stated that US dollar stablecoins have a wide range of applications and low barriers to entry, with related transaction costs significantly lower than using US dollars directly. When exchange rate fluctuations trigger changes in market expectations, funds may rapidly flow into US dollar stablecoins, causing large-scale capital transfers. At the same time, the participation of numerous non-bank institutions in stablecoin issuance has also significantly increased regulatory challenges.

Additionally, Lee Chang-yong noted that South Korea itself possesses a highly developed fast payment system, so the advantages of a retail central bank digital currency (CBDC) are limited. Currently, the central bank is advancing tokenized deposits and wholesale CBDC through multiple parallel pilot programs to maintain the existing two-tier financial system.